To Prevent Shortages of Cash During a Crisis,the Fed

question 24

Multiple Choice

To prevent shortages of cash during a crisis,the Fed:

• A)saves up cash in bank vaults around the country and the world.
• B)reduces liquidity in the economy so that more cash can be saved.
• C)sells U.S.government securities to commercial banks.
• D)demands interest payments on reserves held at the Fed.
• E)increases the discount rate.

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Definitions:

Marginal Workers

Individuals who are employed in a job that does not fully utilize their skills or capabilities, often due to economic fluctuations or lack of available positions.

Real Wages

Wages adjusted for inflation, representing the true purchasing power of income earned from labor.

Productivity

A measure of the efficiency of production, often evaluated as the ratio of output to input in the production process.

Income Effect

The change in individuals' consumption patterns due to an increase or decrease in their income, affecting their purchasing power.